As noted in our last report, investor sentiment is still absorbing the impact from the sharp decline, which marked a 10% slide on the FTSE100, 350 and 13.4% on the mid-cap FTSE250 in just over a week.

Moreover, the erratic nature of this consolidation phase reflects a psychological battle between bulls and bears. The FTSE100 is curently displaying a narrowing triangle formation, "coiling in" to falling highs and rising lows. Against this backdrop we prefer to look for a breakout from the range for a short-to-medium term directional play.

UK stock markets are trading near the lower boundaries of their range formations, which can be found on the FTSE100, FTSE250 and FTSE350 near 5500, 8800 and 2850 respectively.

Of the latter three UK stock markets, FTSE250 is the only one still holding above its long-term 200-day price average (download), also near the chart's reaction lows at 8800.

We await the outcome of today's outcome for the FTSE100 for a clue, but at the time of writing the index is down a fairly modest 28 points (not shown on chart), and this is not enough of a move to give us the next directional signal.